Effect of Ownership Composition on Property Prices and Rents: Evidence from Chinese Investment Boom in US Housing Markets
Abstract: A capital influx into local housing markets would be expected to increase house prices, but the spillover effect onto rental prices is theoretically ambiguous. I estimate both price impacts in U.S. residential housing markets using data from a boom in real estate purchases by buyers from China, which amounted to $200 billion of purchases made between 2010 and 2019. Using a novel method to measure these purchases and an instrumental variable for where purchases are made, I find a large positive house price impact. Consistent with investment q-theory, rents fall as constructions rise, especially in areas with elastic housing supply.
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Description: full text
Provider: Federal Reserve Bank of Chicago
Part of Series: Working Paper Series
Publication Date: 2021-08-16